This research aims to explain mechanisms of the new twin crisis, the influence of such a crisis on European integration, and identify indicators that can predict such a twin crisis. First, the old and the new twin crisis will be explained and the necessity of this research will be elaborated upon. Hereafter, the main mechanisms of the new twin crisis will be identified based on a literature review. From this literature review a set of indicators, accompanied by certain thresholds, will be created that can indicate that a twin crisis is about to happen. These indicators will be used to analyse data from 1970 until 2015 to asses whether this new twin crisis has occured in the past and what its political consequences were. The constructed mechanism to explain the new twin crisis and the list of indicators will be put to the test by conducting an indepth case study of Italy and its risk of encountering a new twin crisis. Based on the model that links the new twin crisis to political consequences, the case study attempts to link the new twin crisis to the European integration project. This research will lay the foundation for the creation of predictive models for the new twin crisis and provide insights in one of the main destabilisers for European integration. It therefore establishes a set-up and lay-out for future research in this specific field.

Standard economic theory suggests that capital should flow from rich countries to poor countries. However, capital has predominantly flowed to rich countries. The three essays in this dissertation attempt to explain this phenomenon. The first two essays suggest theoretical explanations for why capital has not flowed to the poor countries. The third essay empirically tests the theoretical explanations. The first essay examines the effects of increasing returns to scale on international lending and borrowing with moral hazard. Introducing increasing returns in a two-country general equilibrium model yields possible multiple equilibria and helps explain the possibility of capital flows from a poor to a rich country. I find that a borrowing country may need to borrow sufficient amounts internationally to reach a minimum investment threshold in order to invest domestically. The second essay examines how a poor country may invest in sectors with low productivity because of sovereign risk, and how collateral differences across sectors may exacerbate the problem. I model sovereign borrowing with a two-sector economy: one sector with increasing returns to scale (IRS) and one sector with diminishing returns to scale (DRS). Countries with incomes below a threshold will only invest in the DRS sector, and countries with incomes above a threshold will invest mostly in the IRS sector. The results help explain the existence of a bimodal world income distribution. The third essay empirically tests the explanations for why capital has not flowed from the rich to the poor countries, with a focus on institutions and initial capital. I find that institutional variables are a very important factor, but in contrast to other studies, I show that institutions do not account for the Lucas Paradox. Evidence of increasing returns still exists, even when controlling for institutions and other variables. In addition, I find that the determinants of capital flows may depend on whether a country is rich or poor.

The objective of the thesis is to provide a theory that explains the stylized facts regarding the trend of taxation policies, public spending and sovereign debt in advanced economies for the past couple of decades. The thesis focuses on distinguishing two types of public spending - productive investment and welfare payment and develops two different frameworks to examine the importance of the composition of these two types of public spending for economic growth and welfare. Chapter 2 presents a dynamic political-economy model in which voters decide tax rates and the proportion of public goods expenditure devoted to non-productive (but utility-enhancing) public goods. This non-productive public goods expenditure gives rise to a habit effect - it has to be at least as large as a fraction of last period value to provide utility. The median voter theorem applies. Starting from a steady state without the habit effect, its introduction leads to transitional dynamics that mimic several stylized facts: in particular, countries with higher income tend to have larger government and spend more on welfare programme. Chapter 3 studies the impact of public deficit on long-run economic growth by distinguishing the different types of government spending: investment and welfare payment. The model in this chapter predicts a non-monotonic or threshold effect in the relationship between public deficit and steady state growth rate. The composition of the public spending (the ratio between productive and non-productive) dictates the "threshold" in the national debt level. Countries which spend more on providing productive public goods could maintain a higher level of national debt that promotes growth.

Diplomová práce se zaměřuje na zkoumání fiskálních pravidel - omezení fiskální politiky, která byla přijata v průběhu devadesátých let 20. století. Zkoumané země se dělí na dvě skupiny. Zaprvé se jedná o anglofonní země (Spojené království, Austrálie, Nový Zéland) s odlišným právním a politickým systémem než země druhé skupiny - Evropské měnové unie, které musely akceptovat tzv. Maastrichtská kritéria a Pakt stability a růstu. Analýza efektivnosti fiskální pravidel, která zahrnují pravidla numerická, procesní i transparentnostní, se zaměří na rizikovou prémii u úrokových sazeb finančního trhu jednotlivých zemí, na tzv. sovereign rating hodnotící kreditní riziko a samozřejmě také na konkrétní výsledky působení pravidel na fiskální agregáty jednotlivých zemí. Ačkoliv byla klíčová pravidla přijata až v devadesátých letech, reflektovala určitý vývoj veřejných financí v minulosti, proto se práce zaměří také na historické aspekty vzniku těchto pravidel, které hrály důležitou roli při jejich konstrukci. Výsledkem analýzy pak bude mezinárodní komparace efektivity fiskálních pravidel, která pomůže formulovat obecnější hospodářsko-politická doporučení pro země s rizikovým vývojem veřejných financí.

There is a growing and legitimate concern about sovereign debt increasing to unsustainable levels among the Sub-Saharan African (SSA) countries. Understanding the determinants of external debt to these countries influenced the direction of this study. The existing literature that was examined shed light mostly on the qualitative determinants of sovereign borrowing. In addition to existing empirical literature, there is a complimentary need to examine further the quantitative determinants of external debt. The researcher seeks to establish the extent to which the cost of borrowing (proxied by interest rate) explains the changes in the borrowing behaviour (proxied by external debt) among SSA countries. To achieve this objective, data from 36 SSA countries for the period 2009–2017 was used. The data were collected from International Debt Statistics compiled by the World Bank. External debt has been regressed against interest rate and other predictor variables. Hausman tests, robustness tests and collinearity tests were carried out to ascertain the validity of results. Interest rate is found to have a positive determining impact on external debt for all SSA countries aggregated: SSA countries excluding South Africa (SA); SSA excluding Nigeria; SSA excluding Nigeria and SA; SSA excluding debt-distressed countries, middle income and oilexporting countries. It does not have predictive power over changes in external debt for SSA excluding countries at high risk of distress; countries with low to moderate risk of distress; heavily indebted poor countries (HIPC) initiative post-implementation recipient countries; low income, other resource intensive and non-resource-intensive countries. External debt is also found to respond to changes in: gross national income (GNI); exports-to-imports ratio; primary income on foreign direct investment (FDI); reserves-to-imports ratio; FDI-to-GNI ratio; debt service-to-GNI ratio; interest arrears on long-term debt; short-term-to-total-debt ratio; and reserves-to-debt ratio for different country groupings. Different country groupings are found to have unique combinations of external debt determinants.

archives@tulane.edu / The overarching argument in this study is that although sovereign distressed debt investors can create holdout problems during the debt restructuring of a defaulting sovereign, the reality is that they remain a linchpin for an efficient sovereign debt market that guarantees the flow of private credit for capital formation in the Global South. In other words, holdout creditors are a bit of a curate's egg, a necessary feature of the sovereign debt markets. They are not the “spawn of the devil”. The presence of distressed debt investors in the market contributes to the liquidity and efficiency of the market. They enable non-litigant investors who would like to sell their debt and exit the market on their own volition to do so. In addition, they tend to put pressure on recalcitrant sovereign debtors who might not be acting in good faith. They therefore possess “nuisance value” that could spur efficiency in the sovereign debt market. In this context, a universal framework for dealing with holdout problems during the debt restructuring of a defaulting sovereign is needed and that is what this study proposes. Such rules can be developed into a soft-law mechanism spearheaded by the International Monetary Fund (IMF). A global normative framework that has elements of nonmarket private standard setting and nonmarket public standard setting, is therefore proposed to address the disruptive and exploitative activities of these creditors in the sovereign debt market. This normative framework would strike the delicate balance between the rights of commercial creditors on the one hand, and interests of sovereign debtors on the other hand, and inject some measure of equity into the process. In summary, this study challenges the contemporary negative and dismissive narratives about holdout creditors, and the assumption and unshaken faith placed on “restructuring or workout of sovereign debt” as the only favored path to alleviating the perennial problem of sovereign default and the attendant debt crises in the developing world. / 1 / MARIA OLUYEJU

This paper aims to measure, compare and model Sovereign Risk. The risk position of South Africa compared to Emerging Markets as well as in comparison to Developed Markets is considered. Particular interest is taken in how the South African Sovereign Risk environment, and its associated determinants, differs and conforms to that of other Emerging Markets. This effectively highlights how the South African economy is similar to the Emerging Markets and where it behaves differently. Regression, optimisation techniques, dimension reduction techniques as well as Machine Learning techniques, through the use of sentiment analysis, is utilised in this research.

The People’s Republic of China (“China”) claims absolute immunity for itself but embraces a concept of state for immunity purposes that excludes state-owned enterprises (“SOEs”). This position has led to confusion and frustration in international litigation against China and Chinese SOEs, particularly when massive Chinese foreign investments are led by SOEs, including those made under China’s Belt and Road Initiative. Yet, the immunity status of Chinese SOEs is unclear. Against this backdrop, this thesis examines Chinese SOEs’ ability to claim sovereign immunity under the customary international law of restrictive immunity as expressed and built on in the 2004 United Nations Convention on Jurisdictional Immunities of States and Their Property (“UNCSI”), the 1976 United States Foreign Sovereign Immunities Act (“US FSIA”) and the 1978 United Kingdom State Immunity Act (“UK SIA”). In investigating the immunity status of the 97 SOEs in which the Chinese central government has direct and full/majority ownership, this thesis answers two questions: (1) under what circumstances would these 97 Chinese SOEs be treated as part of the state for immunity purposes under the UNCSI, the US FSIA and the UK SIA; and (2) under what circumstances would these 97 Chinese SOEs attract jurisdictional and execution immunities thereunder. A critical part of this analysis involves developing an understanding of Chinese SOEs’ dual identity as defined by the Chinese political economy. Chinese SOEs’ dual identity has two levels of meaning. First, it reflects the fact that some Chinese SOEs are categorized as commercial SOEs and others are categorized as public welfare SOEs in the current SOE reform. Secondly, commercial Chinese SOEs have a dual identity, i.e., a commercial and a sovereign aspect in their operations. While commercial SOEs’ primary goal is to pursue commercial interests, they also implement the state’s social, political, and economic policy goals. This sovereign aspect—primarily reflected as the sovereign purpose in their commercial transactions—adds complexity, but is necessary, to our assessment of Chinese SOEs’ “state” status and immunity under the customary international law of sovereign immunity. The three regimes studied in this thesis—the UNCSI, the US FSIA, and the UK SIA—not only take distinctive approaches toward the definition of the state, but also to the commercial exceptions to jurisdictional immunity and execution immunity. Their different analytical frameworks take us to different conclusions about Chinese SOEs’ “state” status and immunity in some cases. Under the UNCSI and the UK SIA, in principle, Chinese SOEs are unlikely to acquire “state” status to claim immunity in their commercial capacity, and consequently, unable to attract jurisdictional immunity and execution immunity for their assets as separate entities. But public welfare SOEs and some commercial SOEs can potentially attract jurisdictional immunity and execution immunity for their assets because to the extent that the purposes of their conduct—which are often related to inherently sovereign functions like the military or the public welfare—are considered in the overall context, the nature of the commercial transaction could be converted into a sovereign one. Under the US FSIA, Chinese SOEs—either commercial or public welfare ones—are state agencies/instrumentalities for immunity purposes, thus, have “state” status. But, in contrast with the UNCSI and the UK SIA, Chinese SOEs are less likely to attract jurisdictional immunity for their commercial activities or execution immunity for their assets under the US FSIA because the US statute applies a broad commercial exception that only considers the nature of the conduct in characterizing whether a transaction is a commercial one. This thesis’s investigations and conclusions have commercial, sovereign, and policy implications for Chinese SOEs’ international business transactions, China’s sovereign immunity position, and litigation involving China and Chinese SOEs in jurisdictions where restrictive immunity is upheld. First, in commercial terms, the analysis in this thesis will better enable commercial parties and states that have commercial relations with Chinese SOEs to understand the dual identity of Chinese SOEs defined by the Chinese political economy and understand under what circumstances Chinese SOEs can potentially attract jurisdictional and execution immunities. Second, in sovereign terms, my research enables states to assess their diplomatic and economic relationships with China from a foreign relations law perspective as China asserts absolute immunity in foreign domestic courts. As this thesis suggests, litigation against China and its emanations and execution against their assets in states where restrictive immunity is applied could give rise to sensitive political clashes in light of China’s absolute immunity position. The ongoing pandemic litigation between the State of Missouri and China in the US court is an example. In line with its practice, China refused to appear in this and other similar cases. My thesis work could provide legal researchers and practitioners with a better informed legal perspective on these highly political disputes. Third, in policy terms, my Chapter on China’s sovereign immunity and my findings that some commercial and public welfare SOEs can potentially attract jurisdictional and execution immunities under the UNCSI and the UK SIA provide China some reasons to not only embrace restrictive immunity but to clarify the definition of the state for immunity purposes thereunder. Ratifying the UNCSI, in my view, would allow China’s position to conform to international law on the one hand; and allow China to contribute to the development of the law of sovereign immunity on the other hand.

This dissertation consists of three chapters and is centered on the issues of external debt default and growth. In the first chapter, we develop a macrodynamic model of a small open economy that incorporates the effects of haircut and external debt default on the borrowing cost of a debtor country. We argue that the ability to impose a substantial haircut, a reduction in external debt in the face of a sovereign default can work as a strong enough incentive for a debtor country to borrow heavily even when it faces an increased default risk. Calibrating our model to real world data and employing numerical simulations we show that the observed overborrowing and consequently multiple external debt defaults by many countries around the world are equilibrium outcomes in the presence of the haircut induced benefit of sovereign default. Chapter two empirically investigates how debt default affects growth in low-income countries that have a high debt burden. We adopt Rose’s (2005) methodology of using dummy variables to examine both the contemporaneous and lagged effects of debt default on growth in countries that received debt relief assistance under the Heavily Indebted Poor Countries Initiative (HIPC). An inflow of capital is expected to affect these economies differently than other countries which are not eligible for the HIPC initiative. Our findings indicate that initiation of an external debt default leads to a downturn in growth, possibly due to the uncertainty created by such an event. However, debt renegotiation marking the conclusion of a default spell helps to revive growth and contributes to about 1 percentage point increase in growth for these countries. This positive growth effect of successful completion of a default episode is robust to different specifications and is pertinent even in the long run. In the third chapter, we examine the differential impacts of debt renegotiation on the various sectors within an economy. We analyze more than fifty years of data for ten broadly defined sectors from twenty-four mostly developing countries around the world. Our results indicate that debt rescheduling is associated with five to nine percent growth in sectoral productivity in countries outside of sub-Saharan Africa. This positive impact of debt renegotiation is particularly significant in the sectors of mining, construction, trade services, transport services, business services and personal services. Our findings provide support to the postulations of the debt overhang theory and the crowding out theory at sectoral level.

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